Heterogeneous effects of high school peers on educational outcomes

We investigate peer ability effects on high-stakes test scores at ages 16 and 18, and

on the probability of university attendance. To account for endogeneity in peer ability,

we use the average ability of the primary school peers of one’s secondary

school peers, excluding those from the same primary school of the individual,

as an instrumental variable for average secondary school peer ability. Our results

show that average peer quality has a small effect on an individual’s test scores,

and a larger proportion of low-quality peers has a significantly detrimental effect

on achievements of an average student. Furthermore, peer ability seems to have

a stronger effect on students at the bottom of the grade distribution, especially

at age 16.